Lead:

A bubble economy refers to an abnormal inflation caused by an overheated economy, mainly in real estate and stocks. The prices of the two are often unusually sharp at first, and in the end, when their prices have seriously deviated from their real value, it will inevitably lead to a sudden collapse in prices, a sudden contraction of assets, and a serious economic crisis.

Anyone who blows a soap bubble will be fascinated by its colorful splendor, and children will be delighted with it. However, we all know that the bigger, rounder and brighter the bubble, the closer it is to its bursting, and that this bursting is instantaneous. In economics, there is also a phenomenon that is very similar to soap bubbles, and that is the "bubble economy".

A bubble economy refers to an abnormal inflation caused by an overheated economy, mainly in real estate and stocks. The prices of the two are often unusually sharp at first, and in the end, when their prices have seriously deviated from their real value, it will inevitably lead to a sudden collapse in prices, a sudden contraction of assets, and a serious economic crisis.

Speaking of which, the bubble economy is not a new thing, as early as 400 years ago, the "bubble economy" appeared in the West for the first time, but its main body is somewhat special, not the real estate and stocks that are common now, but beautiful tulips.

Tulips were introduced to Western Europe from Turkey, and the Dutch, who were adept at exploitation, soon cultivated more ornamental varieties of tulips. Scarcity is expensive, and the price of these tulip bulbs has risen rapidly. Driven by profits, bright flowers became the object of speculation, so much so that many people who had nothing to do with the cultivation of tulips later became involved, and many people really became rich overnight. Gradually, spot trading has been difficult to meet the demand, so futures trading began to emerge again. Investors, young and old, are all red-faced and full of anticipation to make themselves millionaires with the help of tulips. For this reason, I don't know how many people take out high-interest loans and give it a go.

However, at this point, the bubble suddenly showed its terribleness. On February 4, 1637, the tulips, which had been seriously detached from their practical value, became as terrifying as the devil overnight. On this day, people who hoped for a huge profit from the tulip sale were shocked to find that the price of the tulip had fallen sharply, and the market had quickly collapsed almost in the blink of an eye. Those who bought and sold with high debts suddenly became penniless. Many people committed suicide and society was in turmoil. The chaos plunged the entire Dutch country into an economic crisis, and Tulips staged the famous "bubble event".

After the "Tulip Incident", bubble events in human economic history occurred frequently. In the late 80s of the 20th century, an extremely serious economic bubble burst occurred in Japan.

At the time, Japan's huge economy was a smash hit. Here are just two examples to illustrate how prosperous the market was at that time.

On the streets of Tokyo, people often throw out large sums of money to take a taxi to Nagoya, 300 kilometers away, and taxi drivers in Tokyo can earn up to 10 million yen a year. The second example is the employment of college students, where the company signed a contract with students when they were about to graduate, and sent them to beautiful Hawaii for a vacation before they came to the company for an internship. Why do companies do this? There is only one reason, that is, they are afraid that talents will be snatched away by other companies.

But against this backdrop of prosperity, there is a huge economic bubble hidden. The protagonists of the modern bubble economy are basically real estate and stocks, and Japan is no exception. In 1989, at the peak of the bubble economy, Ginza, Tokyo, one of the world's busiest shopping streets, reached 120 million yen per tsubo (3.3 square meters), and the price of land in Tokyo alone is equivalent to the price of land in the entire United States.

The reason for this phenomenon is that in the mid-80s of the 20th century, a large number of investors poured money into the real estate sector, which caused Japan's housing prices to soar wildly. Since 1985, land prices in the six major cities of Tokyo, Osaka, Nagoya, Kyoto, Yokohama, and Kobe have risen by double-digit percentages each year, with land prices in Tokyo at their peak in 1990 being 2.5 times higher than in 1985. "If you sell all the land in Tokyo, you can buy the United States," said that most Japanese people are proud. At that time, more than half of the Japanese people, who had always been pragmatic and had no good feelings about speculation and stocks, bought stocks. Whoever doesn't buy stocks is stupid, because a one-year investment will have a 100% return.

In such a situation, banks spend a lot of money to persuade people to buy land, the interest rate is almost zero, but the price of land is rising. If you take out a loan to buy land, you will definitely make a lot of money because of the appreciation of the land. In addition to real estate, ordinary people have also taken their bank deposits to the stock market. The price-to-earnings ratio of the Japanese stock market was as high as 80 times (at that time, the price-earnings ratio of the United States, the United Kingdom, and ** was only 25-30 times). In the myth that "the real estate market will not fall" and "the stock market will not fall", the whole country of Japan rejoices.

The peculiarity of the bubble economy is that it is bound to burst suddenly. The price of real estate and stocks in Japan has long exceeded its actual value, and people's buying and selling has turned into pure speculation and speculation.

From the first day of trading in 1990, Japanese stock prices plunged into hell with a jaw-dropping decline, and then the Japanese stock market fell into a bear market for more than a decade. In September of the same year, Japan's NHK television station broadcast a series of special programs on land issues, pointing out that land prices could fall, advocating land tax reform and limiting vicious speculation in real estate.

This was a turning point for Japan's land prices fell sharply for the first time since the end of World War II. Before the bubble economy, the value of a house purchased for 500 million yen fell to 100 million yen in the mid-1990s, a depreciation of 80%. Despite this, a large number of land and houses have not been sold at all, and the completed dwellings are vacant, with 70 per cent of them empty. In 1990, housing prices in Japan's major cities fell by an average of 200%, and by 2005, the average land price in Japan had been declining for 14 consecutive years.

The bursting of Japan's "bubble" economy has brought serious sequelae, such as a sharp decline in stock prices and land prices, a depression in real estate industries, a long-term downturn in the stock market, a sharp increase in non-performing debts, and a decline in corporate enthusiasm for investment in risky industries. The decline in stock prices has directly harmed the general small and medium-sized enterprises and the majority of households.

For 15 years after the biggest bubble in human economic history burst, Japan spent 15 years paying its debts: economic depression, political instability, and rising crime. For example, the JR Chuo Line of the Tokyo Metro was the site of suicide for bankrupts after the bubble burst. For this reason, the subway in Tokyo had to install screen doors to prevent it.

In addition to this, there are many more cases of the bubble economy. Due to the wide range of impacts and great harmfulness of the bubble economy, all countries in the world, including China, where the economy is developing rapidly, are studying the bubble economy, exploring its deep-seated mechanism, and taking various measures to prevent or reduce its adverse effects.

Let's still take real estate as an example. In recent years, housing prices have risen rapidly almost all over the world, including China. How to curb excessively high housing prices and prevent property bubbles has become a major problem faced by all countries. Especially in some new situations in the property market of various countries, a data statistic in August of this year shows that the purchasing power of Russian housing prices continues to decline; Real estate prices in the UK and India continue to rise rapidly, especially in India, where more and more overseas funds are joining the Indian property speculation.

Faced with such a market situation, countries have had to take measures to prevent bubbles. Taking South Korea as an example, a series of measures have been taken in response to the rapid rise in the real estate market in recent years and obvious signs of bubbles: increasing taxes on real estate, imposing heavy taxes on residents with more than two residences, and raising the transaction tax on the transfer of more than two residences from 9% to 36% to 50% to 70%, which effectively curbed residential speculation; South Korea** will also impose a transaction tax of up to 60% on land transactions for non-landowners' own occupation, which effectively deters land resale; At the same time, South Korea's Ministry of Finance, Economy, Construction, and Transportation has also frequently warned of the bubble phenomenon of inflated housing prices, and plans to build 10 houses in Gangnam-gu, Seoul, where housing prices have risen the most, in five years from 2008, and raise bank loan interest rates. These measures have effectively curbed the emergence of real estate bubbles and provided a good reference for other countries.

Unfortunately, in 2008, the collapse of Freddie Mac and Fannie Mae, the two giants of the U.S. real estate industry, caused severe volatility in the real estate market, which has affected the global gold market.

In the context of the global economic downturn, we must be very cautious in choosing to invest, especially when such a serious economic bubble appears, the market is very fragile, and there is a huge crisis hidden under the prosperity. In this harsh financial environment, we can turn to some investments in terms of stable returns, such as gold and other investment projects with strong value preservation, but we need to be cautious when investing in stocks, funds, futures, etc.

Flashy and unsubstantial, it will not last long, and this is the case with the bubble economy. Investors must look at the economic environment of the whole society when choosing investment methods, do not just look at the bubbles that grow bigger and bigger, and must judge the situation, otherwise the huge investment is easy to go down the drain.